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Good morning.
Well… Markets are green.
Futures are up. The VIX is cooling off.
If you blinked, you might have missed the entire tariff cycle that whipsawed us for three days.
Welcome to the TACO trade.
Tariffs Are Cancelled, Obviously.
President Trump pulled back the scheduled tariffs on eight European countries after his Davos speech yesterday. That alone flipped sentiment in a matter of minutes...
But before you get comfortable, let's talk about what matters this morning.
The Greenland Deal Is Still a Moving Target
NATO Secretary General Rutte met with Trump. The headlines say there's a "framework" for a deal. But the details are murky.
Reports suggest small pockets of land, similar to the UK-Cyprus arrangement. There would be no transfer of sovereignty.
Rutte himself said there's "still a lot of work to be done."
The German Finance Minister warned not to get hopes up too soon. And there are more meetings scheduled today. Any one of them could shift sentiment in either direction.
The tariff removal is priced in. A reversal is not.
Japan Finally Caught Its Breath
Remember… the real story here is Japan, which took a beating in its bond market at the same time that we saw the Greenland news blow up.
The Nikkei rallied nearly 2% overnight, snapping a five-day losing streak. JGBs are stabilizing after one of the most violent selloffs in years. The 40-year yield, which broke above 4.23% earlier this week, is no longer making new highs.
That’s good… for now.
This matters because Japan was the real story all week.
Not Greenland.
The carry trade unwind, the funding stress, the global liquidity plumbing.
All of it traced back to Tokyo.
If JGBs hold here, risk assets get breathing room.
If they don't, we're right back in the fire.
The Fed Chair Announcement Could Drop Any Day
Trump said yesterday he has "two or three" candidates left in mind.
Polymarket odds have Kevin Warsh at 44%, Larry Rieder at 31%, and Chris Waller at 14%.
This isn't background noise.
A hawkish appointment reprices the entire rate trajectory.
A dovish surprise does the opposite.
Either way, this announcement moves markets.
And Trump has been teasing "imminent" for a week now.
China Just Opened the Easing Door
PBoC Governor Pan said China has room to cut the reserve requirement ratio and interest rates this year.
He pledged "flexible use of tools."
At the same time, the PBoC announced it's strengthening supervision of the gold market. That briefly knocked gold off its highs overnight.
But Goldman just raised their year-end gold target to $5,400 from $4,900.
The dip might be a gift.
Join Us This Morning
There's a lot to unpack. The TACO rally looks good on the surface, but the underlying risks haven't disappeared.
Japan is stabilizing, not fixed.
Greenland is a framework, not a deal.
And we could get a Fed Chair announcement at any moment.
I'm breaking all of this down live at Market Masters this morning at 8:45 ET.
We'll talk through how to position, what to watch, and how to trade the gap if sentiment flips again.
See you there.
Garrett